State lawmakers believe fewer regulations will lead to more jobs

by Bruce Thompson

Bruce Thompson concentrates his practice on governmental and regulatory activities, including legislative representation and counsel before the U.S. Congress and the N.C. General Assembly. He also focuses on economic-development initiatives, having represented some of the nation’s largest companies in negotiations with local and state officials. He serves as the leader of Raleigh-based Parker Poe Adams & Bernstein LLP’s government and public-policy practice group.

Clients seek certainty in the cost of doing business in North Carolina. The more state government can do to establish regulatory consistency, the more business can flourish here. Regulatory reform has been a political theme in North Carolina for many years. Getting rid of overly burdensome rules has long been important to those who seek to ensure that the cost of doing business here is competitive with neighboring states.

The rhetoric around regulatory reform picked up considerably in the 2010 election cycle. That’s when Republicans gained control of the General Assembly. When the new legislature convened in early 2011, then-Gov. Beverly Perdue asked the state legislature to repeal 900 rules and regulations her administration viewed as unnecessary or excessive.

During the 2011-12 session, the General Assembly made significant changes to the administrative rule-making and hearing process. These changes make it difficult for agencies to adopt burdensome regulations and also provide opportunities for regulated entities to challenge outdated and costly rules. That session also saw the enactment of legislation that made the Office of Administrative Hearings the final decision-maker in administrative appeals instead of the agency that made the decision in dispute.

In November 2012, the GOP extended its margins considerably in both the House and Senate while also gaining control of the Executive Mansion. Regulatory reform was again a campaign theme. Gov. Pat McCrory, House Speaker Thom Tillis and Senate President Pro Tempore Phil Berger all promised to focus on reforms that would lower the cost of business in North Carolina and make state agencies more customer-friendly.

The Regular Session of the 2013-14 biennium of the General Assembly convened on Jan. 9 to elect officers, adopt rules and organize the session. It adjourned that same day and then reconvened for regular business on Jan. 30. In the interim, Tillis created the House Regulatory Reform Committee and appointed Buncombe County Republican Rep. Tim Moffitt to serve as chairman. According to Moffitt, “[T]he new committee’s charge is to help foster a strong environment in North Carolina for private-sector job creation by reviewing existing regulations in the state. The committee will identify those rules which are either outdated, unnecessary, vague or otherwise impose undue burdens on individuals and businesses — and then take appropriate legislative action to either remove or modify them.”

Government Reorganization and Efficiency ActThe reform committee has three subcommittees — business and labor, environment and local government — which have taken up a variety of bills this session. While the Senate did not establish a committee to deal solely with reform, it did not waste time kicking off the session. The first reform bill was Senate Bill 10, Government Reorganization and Efficiency Act, which was filed on Jan. 30 and cleared the Senate Rules Committee on Feb. 5. The Senate approved the bill and sent it to the House on Feb. 7. The Senate version of the legislation immediately ended the terms of members of the Utilities Commission, Industrial Commission, Environmental Management Commission, Coastal Resources Commission, Wildlife Resources Commission and several other commissions. The bill allowed the governor and General Assembly to appoint new members to those groups. The Senate also eliminated all special superior court judge positions. Unlike resident superior court judges, the special superior court judges are appointed by the governor and hear cases statewide. The bill specifically exempted N.C. Business Court judges from elimination. The House made substantial changes to the bill. While it maintained the elimination of many outdated and inactive commissions, it did not fully embrace wholesale changes in several regulatory commissions. The House also chose not to cut the special superior court judges.

The bill went to conference committee in early March, where several attempts at compromise failed. Then, in late April, it appeared that the conferees had come to an agreement. The Senate approved the conference report, which contained many of the original modifications in Senate Bill 10. However, at the last minute, the House conferees recommended that their chamber vote against the conference report, and the bill died.

A new version of the Government Reorganization and Efficiency Act was later introduced in the House as House Bill 1011. Absent from this version was the replacement of members of the Board of Elections and Utilities Commission and the removal of the special superior court judges. The House passed it, but the Senate had not taken up the legislation by early July.

Reforming occupational-licensing boardsThe function and existence of occupational-licensing boards across the state is always a part of regulatory-reform debate. Senate Bill 37 and House Bill 166 direct the Program Evaluation Division of the General Assembly to study the feasibility of establishing a single state agency to oversee the administration of all or some of the occupational-licensing boards; whether greater efficiency and cost-effectiveness can be realized by combining the administrative functions of the boards, while allowing the boards to continue performing the regulatory functions; and whether the total number of boards should be reduced by combining or eliminating some boards.

Even though neither of these bills have passed, the review of the licensing boards may take place under the jurisdiction of the Joint Legislative Program Oversight Committee, which oversees formal evaluation of state-agency programs by the Program Evaluation Division. The mission of the Program Evaluation Division is to examine whether public services are delivered effectively, efficiently and in accordance with the law. It assists the General Assembly in overseeing government functions.

Regulatory Reform Act of 2013On May 2, the Senate passed Senate Bill 612, the Regulatory Reform Act of 2013. The bill includes a fast-track permitting process for certain environmental permits; clarification of local government pre-emption from regulations; reform of environmental regulations; exemptions from riparian buffer rules, which are used to protect bodies of water; and expanded Rules Review Commission authority. It started as nine pages, but as of July additions from the House were expected. Conventional wisdom at the time was that the House Regulatory Reform Committee would fold many of its priorities into this bill and send it back to the Senate.

Periodic review and expiration of rulesA tool for ongoing reform is Senate Bill 112, which calls for a periodic review and expiration of rules. Under the bill, all rules for the Department of Health and Human Services that are not readopted by the end of 2016 will expire. The same fate will apply to all the rules stemming from the Environment and Natural Resources Commission by the end of 2017. The next year will be one for reviewing the rules of the occupational-licensing boards and commissions, and all other rules must be re-examined by the end of 2019, or they will be automatically repealed too. After that, every rule on the books will need to be re-approved every 10 years or else it will be repealed. The House added these provisions along to Senate Bill 112 and passed it on July 11. The bill also contains restrictions on the ability of local governments to regulate billboards, changes in the appointment of deputy commissioners to the Industrial Commission and a repeal of protest petitions in rezoning cases. The bill now goes back to the Senate for concurrence.

Regulatory reform will continue to be front and center in North Carolina politics for the foreseeable future. You know the rules that impact your ability to do good business and create jobs. Make sure that the legislators who represent you and your company have the benefit of that knowledge. Only then will they be able to enact the reforms that will help North Carolina’s economy continue to grow.